2019 (8) TMI 1490 - HC - Income Tax

High Court upholds Tribunal decisions on advertising expenses, dismisses disallowance appeal for Assessment Year 2009-10.

The High Court of Bombay dismissed the appeal challenging the Tribunal's order for Assessment Year 2009-10. The Court upheld the Tribunal's decisions ... Determination of Income special Cases - expenditure related to film production - advertisement and publicity expenses incurred after date of certification - disallowed by AO invoking Rule 9A of IT Rule by holding that amount not allowable under rule 9A, may be allowed under Section 37 of IT Act, 1961 - whether expenditure related to film production has to be allowed only as per Rule 9A(5) or Rule 9A(6)? - HELD THAT:- Issue raised herein stands concluded against the Revenue and in favour of the Respondent-Assessee by the decision of this Court in CIT v. Dharma Productions (P.) Ltd. . [2019 (3) TMI 1271 - BOMBAY HIGH COURT] Disallowance u/s. 14A r.w.r. 8D - if exempt income had not been earned for the year under scrutiny - HELD THAT:- Issue stands concluded against the Revenue and in favour of the Respondent by the decision of this Court in Respondent-Assessee's own case [2019 (6) TMI 1490 - BOMBAY HIGH COURT]as held that in the absence of any exempt income arising in the previous year relevant to the subject Assessment Year, no occasion to make any disallowance under Section 14A of the Act can arise. - Decided against revenue. Issues:1. Allowability of advertisement and publicity expenses under Section 37 of IT Act, 1961.2. Disallowance under Section 14A r.w.r. 8D in the absence of exempt income.Analysis:Issue 1: Allowability of advertisement and publicity expenses under Section 37 of IT Act, 1961:The appellant challenged the order of the Income Tax Appellate Tribunal (the Tribunal) regarding the allowance of advertisement and publicity expenses of Rs. 2,39,39,631 incurred after the date of certification. The Tribunal allowed the expenses under Section 37 of the IT Act, 1961, despite the AO's disallowance invoking Rule 9A. The appellant contended that the expenses related to film production should only be allowed as per Rule 9A(5) or Rule 9A(6) under the Chapter 'Determination of Income special Cases.' However, the Court noted that the issue was already decided against the Revenue in a previous case, CIT v. Dharma Productions (P.) Ltd. The Court upheld the Tribunal's decision, stating that the question did not raise any substantial question of law. Therefore, the Court dismissed the appeal on this issue.Issue 2: Disallowance under Section 14A r.w.r. 8D in the absence of exempt income:The appellant also raised a question regarding the disallowance under Section 14A r.w.r. 8D, arguing that no disallowance should be made if exempt income had not been earned for the relevant year. The Court referred to a previous decision in the case of Pr. CIT v. Red Chillies Entertainment Pvt. Ltd., where it was held that in the absence of any exempt income in the relevant previous year, no disallowance under Section 14A of the Act could be made. Therefore, the Court concluded that the question raised did not give rise to any substantial question of law and dismissed the appeal on this issue as well.In conclusion, the High Court of Bombay dismissed the appeal under Section 260-A of the Income Tax Act, 1961, challenging the Tribunal's order dated 31st May, 2016, for Assessment Year 2009-10. The Court upheld the Tribunal's decisions regarding the allowance of advertisement and publicity expenses under Section 37 and the disallowance under Section 14A r.w.r. 8D in the absence of exempt income.